Federal Acquisition Regulations; Subcontracts for Commercial Items

summary: At 60 FR 11198, March 1, 1995, a proposed rule was published

in the Federal Register to amend the Federal Acquisition Regulation

(FAR) to implement portions of Title VIII of the Federal Acquisition

Streamlining Act of 1994 (the Act) dealing with the acquisition of

commercial items. The background and the regulatory text of that

proposed rule stated that the list of laws and the list of clauses

would be published at a later date. This case provides the complete

list of laws determined to be inapplicable to Executive agency

contracts and subcontracts for commercial items and the clauses

determined to be applicable to subcontracts for the acquisition of

commercial items. This regulatory action was subject to Office of

Management and Budget review under Executive Order 12866, dated

September 30, 1993.

DATES: Comments should be submitted on or before May 22, 1995, to be

considered in the formulation of a final rule.

Public Meeting: April 3, 1995, 1 p.m. at: General Services

Administration Auditorium, 18th & F Streets, NW, First Floor,

Washington, DC 20405.

Written and Oral Statements: Statements prepared for oral

presentation must be sent to the FAR Secretariat at the address given

below, not later than March 29, 1995.

ADDRESSES: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (VRS), 18th & F

Streets, NW, Room 4037, Washington, DC 20405.

Please cite FAR case 94-791 in all correspondence related to this

case.

FOR FURTHER INFORMATION CONTACT: Colonel Laurence M. Trowel, Commercial

Items Team Leader, at (703) 695-3858 in reference to this FAR case. For

general information, contact the FAR Secretariat, Room 4037, GS

Building, Washington, DC 20405 (202) 501-4755. Please cite FAR case 94-

791.

SUPPLEMENTARY INFORMATION:

A. Background

The Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355)

provides authorities that streamline the acquisition process and

minimize burdensome Government-unique requirements. Major changes that

can be expected in the acquisition process as a result of

implementation of the Act include changes in the areas of Commercial

Item Acquisition, Simplified Acquisition Procedures, the Truth in

Negotiations Act, and Introduction of the Federal Acquisition Computer

Network (FACNET).

This notice announces proposed revisions developed under FAR Case

94-791, Subcontracts for Commercial Items. FAR Case 94-790, published

as a proposed rule at 60 FR 11198, March 1, 1995, proposed revisions to

the FAR to implement portions of Title VIII of the Federal Acquisition

Streamlining Act of 1994. In the supplementary information, paragraph

A, Background, and at the following three citations in that proposed

rule, the Federal Register notice indicated that the list of laws

determined to be inapplicable to subcontracts for the acquisition of

commercial items in accordance with section 8003(a) of the Act and the

list of clauses applicable to subcontracts for the acquisition of

commercial items would be published in the Federal Register in a future

proposed rule under FAR case 94-791:

--Proposed FAR 12.403, Applicability of certain laws to subcontracts

for the acquisition of commercial items, at paragraphs (a), (b), and

(c);

--Proposed FAR 52.212-5, Contract Terms and Conditions Required to

Implement Statutes or Executive Orders--Commercial Items, at paragraph

(d); and

--Proposed FAR 52.244-XX, Subcontracts for Commercial Items and

Commercial Components, at paragraph (d).

This proposed rule revises the earlier rule by providing the full

list of laws determined to be inapplicable to prime contracts at

12.402, and provides the list of laws determined to be inapplicable to

subcontracts at 12.403. In addition, this proposed rule includes the

clauses determined to be applicable to subcontracts for the acquisition

of commercial items at 52.212-5 paragraph (d) and 522.244-XX, paragraph

(d).

An area of concern discussed extensively by the Team was the

applicability of the Buy American Act (41 U.S.C. 10 (a)-(d)) and Trade

Agreements Act (19 U.S.C. 2512(a)) to subcontracts. The Buy American

Act requires that ``only such unmanufactured articles, materials, and

supplies as have been mined or produced in the United States, and only

such manufactured articles, materials, and supplies as have been

manufactured in the United States substantially all from articles,

materials, or supplies mined, produced, or manufactured, as the case

may be, in the United States, shall be acquired for public use.'' The

effect of this language is that prime contractors must consider the

cost and origin of components in determining whether an end item

manufactured in the United States meets the definition of a domestic

end product. While the Act does not specifically use the terms

``subcontract'' or ``subcontractors,'' concern was raised that

including these two laws on the list of laws inapplicable to

subcontractors would result in confusion regarding whether the cost and

origin of subcontractor components needed to be considered for

commercial items. Consequently, the decision was made to leave these

two laws off the list at 12.403 and solicit further public comment on

the issue.

The proposed rule at 12.402 and 12.403 includes the full list of

laws (Civilian and DOD-unique) determined to be inapplicable at both

the prime and subcontractor level. Including the full list of laws in

this case provides the public with a complete view of the Government's

implementation of Section 8003. The final disposition of the DOD-unique

laws, with respect to inclusion in the FAR, will be determined during

the resolution of public comments.

Public Meeting. The FAR Council is interested in an exchange of

ideas and opinions on this rule. For that reason, the FAR Council is

conducting a series of public meetings. A public meeting will be held

on April 3, 1995, with respect to FAR Case 94-790, Acquisition of

Commercial Items. This rule, FAR Case 94-791, will also be discussed at

the April 3rd meeting. The public is encouraged to furnish its views;

the Council anticipates that public comments will be very helpful in

formulating final rules.

Persons or organizations wishing to make presentations will be

allowed 10 minutes each, provided they notify the FAR Secretariat at

(202) 501-4755 and submit written statements of the presentation by

March 29, 1995. Persons or organizations with similar positions

[[Page 15221]] are encouraged to select a common spokesman for

presentation of their views. This meeting, in conjunction with the

Federal Register notice soliciting public comments on the rule, will be

the only opportunity for the public to present its views.

B. Regulatory Flexibility Act

This proposed rule will have a significant economic impact on a

substantial number of small entities within the meaning of the

Regulatory Flexibility Act, 5 U.S.C. 601, et seq. This rule will have a

beneficial impact by significantly limiting the flow down of

Government-unique terms and conditions to subcontractors at all levels

thereby minimizing the burden on a significant number of small

businesses.

An Initial Regulatory Flexibility Analysis (IRFA) was provided to

the Chief Counsel for Advocacy for the Small Business Administration in

conjunction with FAR Case 94-790, Acquisition of Commercial Items. That

IRFA applies to this rule as well. A copy of the IRFA may be obtained

from the FAR Secretariat. Comments are invited. Comments from small

entities concerning the affected FAR subpart will be considered in

accordance with 5 U.S.C. 610. Such comments must be submitted

separately and should cite 5 U.S.C. 601 et seq. (FAR Case 94-791), in

correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the proposed

changes to the FAR do not impose recordkeeping or information

collection requirements, or collections of information from offerors,

contractors, or members of the public which require the approval of the

Office of Management and Budget under 44 U.S.C. 3501 et seq.

List of Subjects in 48 CFR Parts 12 and 52

Government procurement.

Dated: March 20, 1995.

Edward Loeb,

Deputy Project Manager for the Implementation of the Federal

Acquisition Streamlining Act of 1994.

Therefore, it is proposed that 48 CFR Parts 12 and 52 be amended as

set forth below:

1. The authority citation for 48 CFR Parts 12 and 52 continues to

read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 12--ACQUISITION OF COMMERCIAL ITEMS

2. In the table of contents, the title of Part 12 is revised as set

forth above.

3. Section 12.402 is revised to read as follows:

12.402 Applicability of certain laws to executive agency contracts for

the acquisition of commercial items.

(a) The following laws are not applicable to executive agency

contracts for the acquisition of commercial items:

(1) 41 U.S.C. 43, Walsh-Healey Act (see 48 CFR (FAR) part 22,

subpart 22.6);

(2) 41 U.S.C. 254(a) and 10 U.S.C. 2306(b), Contingent Fees (see 48

CFR (FAR) 3.404);

(3) 41 U.S.C. 416(a)(6), Minimum Response Time for Offers under

Office of Federal Procurement Policy Act (see 48 CFR (FAR) 5.203);

(4) 41 U.S.C. 701 et seq., Drug-Free Workplace Act of 1988 (see 48

CFR (FAR) 23.501);

(5) 10 U.S.C. 2384(b), Requirement to Identify Suppliers and

Sources of Supply (see 48 CFR (DFARS) part 217, subpart 217.73);

(6) 10 U.S.C. 2397, Reports by Employees or Former Employees of

Defense Contractors;

(7) 10 U.S.C. 2397c, Defense Contractor Requirements Concerning

Former DoD Officials;

(8) 10 U.S.C. 2408, Prohibition on Persons Convicted of Defense-

Related Felonies (see 48 CFR (DFARS) 203.57); and

(9) 10 U.S.C. 2410b, Contractor Inventory Accounting System

Standards (see 48 CFR (DFARS) part 242, subpart 242.72).

(b) Certain requirements of the following laws have been eliminated

for executive agency contracts for the acquisition of commercial items:

(1) 33 U.S.C. 1368, Requirement for a certificate and clause under

the Federal Walter Pollution Control Act (see 48 CFR (FAR) 23.105);

(2) 40 U.S.C. 327 et seq., Requirement for a certificate and clause

under the Contract Work Hours and Safety Standards Act (see 48 CFR

(FAR) 22.305);

(3) 41 U.S.C. 57(a) and (b), and 58, Requirement for a clause and

certain other requirements related to the Anti-Kickback Act of 1986

(see 48 CFR (FAR) 3.502);

(4) 41 U.S.C. 423e(1)(B), Requirement for certain certifications

under the Procurement Integrity Act (see 48 CFR (FAR) 3.104-9);

(5) 42 U.S.C. 7606, Requirement for a certificate and clause under

the Clean Air Act (see 48 CFR (FAR) 23.105); and

(6) 49 U.S.C. 40118, Requirement for a certificate and clause under

Fly American provisions (see 48 CFR (FAR) 47.405).

(c) The applicability of the following laws have been modified in

regards to executive agency contracts for the acquisition of commercial

items:

(1) 41 U.S.C. 253g and 10 U.S.C. 2402, Prohibition on Limiting

Subcontractor Direct Sales to the United States (see 48 CFR (FAR)

3.503);

(2) 41 U.S.C. 254(d) and 10 U.S.C. 2306a, Truth in Negotiations Act

(see 48 CFR (FAR) 15.804);

(3) 41 U.S.C. 422, Cost Accounting Standards (see 48 CFR (FAR) Part

99); and

(4) 10 U.S.C. 2397b, Limits on Employment for Certain Former DoD

Officials (see 48 CFR (FAR) 203.170).

(d) The FAR prescription, provision or clause for each of these

statutes has been revised in the appropriate part to reflect their

proper application to the acquisition of commercial items.

4. Section 12.403 is revised to read as follows:

12.403 Applicability of certain laws to subcontracts for the

acquisition of commercial items.

(a) The following laws are not applicable to subcontracts under

either a contract for the acquisition of commercial items or a

subcontract for the acquisition of commercial items:

(1) 15 U.S.C. 644(d), Requirements relative to labor surplus areas

under the Small Business Act (see 49 CFR (FAR) part 19, subpart 19.2);

(2) 41 U.S.C. 43, Walsh-Healey Act (see 48 CFR (FAR) part 22,

subpart 22.6);

(3) 41 U.S.C. 253d, Validation of Proprietary Data Restrictions

(see 48 CFR (FAR) part 27, subpart 27.4);

(4) 41 U.S.C. 254(a) and 10 U.S.C. 2306(b), Contingent Fees (see 48

CFR (FAR) part 3, subpart 3.4);

(5) 41 U.S.C. 416(a)(6), Minimum Response Time for Offers under

Office of Federal Procurement Policy Act (see 48 CFR (FAR) part 5,

subpart 5.2);

(6) 41 U.S.C. 418a, Rights in Technical Data (see 48 CFR (FAR) part

27, subpart 27.4);

(7) 41 U.S.C. 701 et seq., Drug-Free Workplace Act of 1988 (see 48

CFR (FAR) 23.5);

(8) 46 U.S.C. 1241(b), Transportation in American Vessels of

Government Personnel and Certain Cargo (see 48 CFR (FAR) part 47,

subpart 47.5);

(9) 49 U.S.C. 40118, Fly American provisions (see 48 CFR (FAR) part

47, subpart 47.4);

(10) Pub. L. 90-469, William Langer Jewel Bearing Plant Special Act

(see 48 CFR (FAR) part 8, subpart 8.2); [[Page 15222]]

(11) 10 U.S.C. 2301, note, as amended by Section 2091, Pub. L. 103-

355, Payment Protections for Subcontractors and Suppliers (see 48 CFR

(FAR) part 28, subpart 28.1 and part 32, subpart 32.1);

(12) 10 U.S.C. 2241, note (Pub. L. 102-396, Section 9005, as

amended by Pub. L. 103-139, Section 8005), Limitations on Procurement

of Food, Clothing, and Specialty Metals Not Produced in the United

States (see 48 CFR (DFARS) part 225, subpart 225.70);

(13) 10 U.S.C. 2320, Rights in Technical Data (see 48 CFR (DFARS)

part 227, subpart 227.4);

(14) 10 U.S.C. 2321, Validation of Proprietary Data Restrictions

(see 48 CFR (DFARS) part 227, subpart 227.4);

(15) 10 U.S.C. 2327, note (Pub. L. 103-160, Section 843), Reporting

Requirement Regarding Dealings with Terrorist Countries (see 48 CFR

(DFARS) part 209, subpart 209.1);

(16) 10 U.S.C. 2391, note (Pub. L. 101-510, Section 4201(a)(1)(B)),

Notification of Substantial Impact on Employment (see 48 CFR (DFARS)

part 249, subpart 249.70);

(17) 10 U.S.C. 2393, Prohibition Against Doing Business with

Certain Offerors or Contractors (see 48 CFR (DFARS) part 209, subpart

209.4);

(18) 10 U.S.C. 2501, note (Pub. L. 103-160, Section 1372),

Notification of Proposed Program Termination (see 48 CFR (DFARS) part

249, subpart 249.70);

(19) 10 U.S.C. 2534, Miscellaneous Limitations on the Procurement

of Goods other than United States Goods (see 48 CFR (DFARS) part 225,

subparts 225.7004, 225.7007, 225.7010, and 225.7016);

(20) 10 U.S.C. 2631, Cargo Preference Act (see 48 CFR (DFARS)

247.5); and

(21) National Defense Authorization Acts, Appropriations Acts, and

Other Statutory Restrictions on Foreign Purchases as follows: Pub. L.

100-202, Section 8088, Polyacrylonitrile Based Carbon Fiber; Pub. L.

101-511, Section 8041, Anchor and Mooring Chain; Pub. L. 102-172,

Section 8111, Carbon, Alloy and Armor Steel Plates; Pub. L. 102-396,

Section 9108, Four Ton Dolly Jacks; Pub. L. 102-484, Section 832, Anti

friction Bearings; Pub. L. 103-139, Section 8090, Aircraft Fuel Cells;

Pub. L. 103-139, Section 8124, Totally Enclosed Lifeboat Survival

Systems; Pub. L. 103-335, Section 8023, Supercomputers; Pub. L. 103-

335, Section 8050, Multibeam Sonar Mapping Systems; Pub. L. 103-335,

Section 8115, Ship Propellers; and Pub. L. 103-335, Section 8120, 120

mm Mortars and Ammunition.

(b) Certain requirements of the following laws have been eliminated

for subcontracts under either a contract for the acquisition of

commercial items or subcontract for the acquisition of commercial

items:

(1) 33 U.S.C. 1368, Requirement for a certificate and clause under

the Federal Water Pollution Control Act (see 48 CFR (FAR) part 23,

subpart 23.1);

(2) 40 U.S.C. 327 et seq., Requirement for a certificate and clause

under the Contract Work Hours and Safety Standards Act (see 48 CFR

(FAR) part 22, subpart 22.3);

(3) 41 U.S.C. 423e(1)(B), Requirement for certain certifications

under the Procurement Integrity Act (see 48 CFR (FAR) part 3, subpart

3.1); and

(4) 42 U.S.C. 7606, Requirements for a certificate and clause under

the Clean Air Act (see 48 CFR (FAR) part 23, subpart 23.1).

(c) The applicability of the following laws have been modified in

regards to subcontracts under either a contract for the acquisition of

commercial items or a subcontract for the acquisition of commercial

items:

(1) 41 U.S.C. 253g and 10 U.S.C. 2402, Prohibition on Limiting

Subcontractor Direct Sales to the United States (see 48 CFR (FAR) part

3, subpart 3.5);

(2) 41 U.S.C. 254(d) and 10 U.S.C. 2306a, Truth in Negotiations Act

(see 48 CFR (FAR) part 15, subpart 15.8); and

(3) 41 U.S.C. 422, Cost Accounting Standards (see 48 CFR (FAR) part

99).

(d) The FAR prescription, provision or clause for each of these

statutes has been revised in the appropriate part to reflect their

proper application to the acquisition of commercial items.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

5. Section 52.212-5 is revised to read as follows:

52.212-5 Contract Terms and Conditions Required to Implement Statutes

or Executive Orders--Commercial Items.

As prescribed in 12.302(b)(4), insert the following clause:

Contract Terms and Conditions Required to Implement Statutes or

Executive Orders--Commercial Items (XXX 1995)

(a) The Contractor agrees to comply with the following FAR

clauses, which are incorporated in this contract by reference, to

implement provisions of law or executive orders applicable to

acquisitions of commercial items:

(1) 52.219-8, Utilization of Small Business Concerns and Small

Disadvantaged Business Concerns (15 U.S.C. 637 (d)(2) and (3));

(2) 52.222-3, Convict Labor (E.O. 11755); and

(3) 52.233-3, Protest After Award (31 U.S.C. 3553 and 40 U.S.C.

759).

(b) The Contractor agrees to comply with the following FAR and

FIRMR clauses in this paragraph (b) that are indicated as being

incorporated in this contract by reference to implement provisions

of law or executive orders applicable to acquisitions of commercial

items or components:

____ (1) 52.203-6, Restrictions on Subcontractor Sales to the

Government, with Alternate I (41 U.S.C. 253g and 10 U.S.C. 2402).

____ (2) 52.203-10, Price or Fee Adjustment for Illegal or

Improper Activity (41 U.S.C. 423).

____ (3) 52.219-14, Limitation on Subcontracting (15 U.S.C.

637(a)(14)).

____ (4) 52.222-26, Equal Opportunity (E.O. 11246).

____ (5) 52.222-35, Affirmative Action for Special Disabled and

Vietnam Era Veterans (38 U.S.C. 2012).

____ (6) 52.222-36, Affirmative Action for Handicapped Workers

(29 U.S.C. 793).

____ (7) 52.222-37, Employment Reports on Special Disabled

Veterans and Veterans of the Vietnam Era (38 U.S.C. 2012).

____ (8) 52.225-3, Buy American Act--Supplies (41 U.S.C. 10).

____ (9) 52.225-9, Buy American Act--Trade Agreements Act--

Balance of Payments Program (41 U.S.C. 10, 19 U.S.C. 2501-2582).

____ (10) 52.225-17, Buy American Act--Supplies Under European

Community Sanctions for End Products (E.O. 12849).

____ (11) 52.225-18, European Community Sanctions for End

Products (E.O. 12849).

____ (12) 52.225-19, European Community Sanctions for Services

(E.O. 12849).

____ (13) 52.225-21, Buy American Act--North American Free Trade

Agreement Implementation Act--Balance of Payments Program (41 U.S.C.

10, Pub. L. 103-187).

____ (14) 52.247-64, Preference for Privately Owned US Flagged

Commercial Vessels (46 U.S.C. 1241).

____ (15) 201-39.5202-3, Procurement Authority (FIRMR).

(This acquisition is being conducted under ______ delegation of

GSA's exclusive procurement authority for FIP resources. The

specific GSA DPA case number is ______.)

(c) The Contractor agrees to comply with the following FAR

clauses in this paragraph (c), applicable to commercial services,

that are indicated as being incorporated in this contract by

reference to implement provisions of law or executive orders

applicable to acquisitions of commercial items or components:

____ (1) 52.222-41, Service Contract Act of 1965, as amended (41

U.S.C. 351, et seq.).

____ (2) 52.222-42, Statement of Equivalent Rates for Federal

Hires (29 U.S.C. 206 and 41 U.S.C. 351, et seq.).

____ (3) 52.222-43, Fair Labor Standards Act and Service

Contract Act--Price Adjustment (Multiple Year and Option Contracts)

(29 U.S.C. 206 and 41 U.S.C. 351 et seq.).

____ (4) 52.222-44, Fair Labor Standards Act and Service

Contract Act--Price Adjustment (29 U.S.C. 206 and 41 U.S.C. 351 et

seq.).

____ (5) 52.222-47, SCA Minimum Wages and Fringe Benefits

Applicable to Successor Contract Pursuant to Predecessor Contractor

Collective Bargaining Agreement (CBA) (41 U.S.C. 351 et

seq.). [[Page 15223]]

(d) Notwithstanding the requirements of the clauses in

paragraphs (a), (b) or (c) of this clause, the Contractor is not

required to include any FAR clause, other than those listed below,

in a subcontract for commercial items or commercial components--

(1) 52.222-26, Equal Opportunity (E.O. 11246);

(2) 52.222-35, Affirmative Action for Special Disabled and

Vietnam Era Veterans (38 U.S.C. 2012(a)); and

(3) 52.222-36, Affirmative Action for Handicapped Workers (29

U.S.C. 793).

(End of clause)

6. Section 52.244-XX is added to read as follows:

52.244-XX Subcontracts for Commercial Items and Commercial Components.

As prescribed in 44.403, insert the following clause:

Subcontracts for Commercial Items and Commercial Components (XXX 1995)

(a) Definition. Commercial item, as used in this clause, has the

meaning contained in the clause at 52.202-1, Definitions.

Subcontract, as used in this clause, includes a transfer of

commercial items between divisions, subsidiaries, or affiliates of

the Contractor or subcontractor.

(b) To the maximum extent practicable, the Contractor shall

incorporate, and require its subcontractors at all levels to

incorporate, commercial items or nondevelopmental items other than

commercial items, as components of items to be supplied under this

contract.

(c) If in awarding a subcontract for commercial items an

exception under 15.804-1(a) does not apply, the subcontractor may be

required to submit cost or pricing data and comply with the

appropriate clauses prescribed in FAR Part 15.

(d) Notwithstanding any other clause of this contract, the

Contractor is not required to include any FAR provision or clause,

other than those listed below and as may be required by paragraph

(c) of this clause, in a subcontract for commercial items or

commercial components:

(1) 52.203-12, Limitation on Payments to Influence Certain

Federal Transactions (31 U.S.C. 1352);

(2) 52.222-26, Equal Opportunity (E.O. 11246);

(3) 52.222-35, Affirmative Action for Special Disabled and

Vietnam Era Veterans (38 U.S.C. 2012(a)); and

(4) 52.222-36, Affirmative Action for Handicapped Workers (29

U.S.C. 793).

(e) The Contractor shall include the terms of this clause,

including this paragraph (e), in subcontracts awarded under this

contract.

(End of clause)

[FR Doc. 95-7120 Filed 3-21-95; 8:45 am]

BILLING CODE 6820-34-M